Early last week, investors had several reasons to celebrate as the S&P 500 crossed the 1200 point mark (up almost 50% from this time last year), the Canadian dollar reached parity with the American dollar, and the start of the first quarter reporting season had several companies reporting better-than-expected earnings.

However on Friday, American markets experienced their biggest drops in two months, when the Securities Exchange Commission (SEC) announced civil fraud charges against Goldman Sachs Group Inc. The SEC alleges that a hedge fund manager associated with the financial firm helped created a mortgaged-backed investment for clients, and then bet against the investment.

Markets opened lower Monday on morning as investors are concerned about potential long-term ramifications of this story, and whether the SEC might investigate other banks that traded similar securities. However by Monday’s close, markets had recovered the early morning losses and finished moderately higher.

For all the young readers out there, I spotted an article titled “The Case for Investing in your 20’s”, in the “Wealthy Boomer” blog of the Financial Post. Being in this age bracket myself, it’s good to be reminded of the advantages of investing at a young age.

For the average person in their 20’s, putting away money for retirement is not high on their priority list. Only 29% of people between18-34 put money towards their RRSP, compared to the national average of 36%. Although it’s understandable for someone who’s 30-40 years away from retirement to value a car purchase or that next trip to Europe over their savings plan, he/she should consider the following scenario:

Between the ages of 21-29, if you invest $2,000 a year (for a total of $18,000), assuming a pre-tax return of 8%, you would have $430,711 in savings by age 65. If you were to start putting away $2,000 a year at age 30, you would need to invest nearly four times as much ($70,000) to reach the same figure by 65.

It’s a simple time value of money calculation, but it highlights how much easier it is to start investing for retirement at an early age.